Sunday, September 7, 2008

Fershee Op-Ed

Former Red Lion guest blogger, Josh Fershee, has an Op-Ed on government bailouts in the Lansing State Journal today.


Beth Farmer said...

Prof. Fershee makes some strong points and reminds us of Mark Twain's sentiment that history doesn't repeat itself, but it rhymes. It has been almost 30 years since the 1979 multi-billion dollar Chrysler bailout and Tom Paxton wrote "I'm changing my name to Chrysler." Chrysler also got the benefit of increased trade barriers to foreign imports and concessions from employees and others. Modern concern about fairness and equity, as well as national security, is valid in these cases.

Prof. Fershee's strings are a pro-consumer proposal and the insurance analogy is a creative one. Non-competition-related remedies could not be mandated in a merger case, although some settlements have included fencing out provisions. At the end of the day, a focus on who really reaps the benefits and who assumed the risk of loss at the outset is wise.

Alison M. Kilmartin said...

I would love to hear comments from Professors Fershee and Farmer on the column available at this link:

Josh Fershee said...

Thanks for the article, Alison. Jim Rogers is always good for some interesting quotes. I am not sure I would go quite so far with the analogy, but I generally agree that the bailouts don't do much of what they purport to do. Either we believe in free markets or we don't. It's one thing to intervene where there is a market failure, quite another where there are company failures. Market losses, even excessive ones, are not failures.

The Bear Stearns bailout still really irks me. I "liked" the bailout deal better when it was $2.50 rather than $10 per share; the higher price is a bailout for shareholders. I don't recall anyone crying for an Enron bailout when countless retirement plans suddenly evaporated.

Prof. Farmer also makes a great point about DOJ/FTC review under current law. I suppose such a review power could be added by Congress, but I was so used to divestiture as a matter of course in both FTC/DOJ and FERC review as part of the energy merger approval negotiations, I failed to mention that.

Beth Farmer said...

Thanks to Alison for the cite to the article. I'm not familiar with either the interest group B&MI or Mr. Rogers, so I read the column looking for some smart commentary. It isn't a good sign when the opening statement is an assertion that, because of the bailout, America is more communist than China and thus to imply that your opponents are "communists." That's an insult (I assume), not a convincing argument. The term seems to be a surrogate for "something I disagree with." I will have a lot to say about the role of ideology in modern China, but the comparison doesn't advance this discussion or make us think about the issue, it's a sucker punch.

My students will remember my advice - if you disagree with an argument, make a better one against it - if you strongly disagree, make a MUCH better argument. We all left playground world of sneering schoolyard insults and yelling long ago. Modern public discourse has become degraded in many ways, let's take a strnd for something edifying. Law school community - words are your tools; use them with precision.

Now to the substance - 'let 'em fail.' Interesting point and maybe you could convince me with excellent argumentation. Indeed perhaps in this situation, especially becasue I am enlightened by Prof. Fershee. But are there any limits to this prescription? Any firms that the US should save? Well, what about national security? Bankruptcy does not always result in reorganization - what are the risks of permitting an industry to exit and move offshore?